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Economic Policy: Investing as Confused Policy Makers Implement 'Trickle Up' Economics
Pinnacle Digest writes: Schiff argues that political 'left wingists' have long tried to cast doubt and concern over free market capitalism by branding it the 'trickle down' system. By misrepresenting this system, and characterizing it as an unfair and inefficient system, it has helped liberals demonize policies that lower taxes and reduce regulation on business.
As policies are implemented to fix these 'supposed' problems, a more fundamental problem has emerged as a result of a total lack of economic understanding by policy makers. Since the global financial crisis emerged in 2007, governments have attempted to inject funds directly into the economy. In policy makers' minds, the consumer is the engine of the economy and creating an environment of easing monetary policies will allow them to continue to spend and bail out the economy.
Shockingly, governments appear to now, judging by their policy implementations, believe in a system of "trickle up" economics. The idea of this is that prosperity flows upward from government into the lower and middle classes and ultimately to the upper class. There are so many things wrong with this upside down pyramid we don't even know where to start!
In order to achieve this, policy makers must keep interest rates at record low levels and tax the rich to fund its public welfare state.
They have it wrong.
Schiff proclaims that politicians have it completely backwards. He comments that, "the savings that they find so unproductive is actually the foundation upon which the economy rests." It is the savings of the rich which form the capital that funds investment and increases productivity. Only when a country produces more can it consume more. Supply is the issue, not demand. Demand presents itself accordingly in a capitalist society and supply adapts to meet that demand. The idea that demand needs to be manipulated by government cash stimulation is false. Schiff uses cell phones as a great example, highlighting the only cure for America and expunging any myths that suggest otherwise.
Governments don't like savers, because they park their money on the sidelines and do not use it for short-term purchases, which the government believes is needed to ignite the economy. Studies show that lower income individuals will take advantage of low interest rates and spend, whereas wealthy individuals are more likely to save and invest. It's easy to understand why the government continues to keep interest rates at record low prices.